National Insurance Tax Cut
In a fresh attack on freelancers, the Government has scrapped its promised National Insurance Tax Cut.
The Government previously announced that it would scrap Class 2 National Insurance contributions.
This was due to take place in April but they delayed it for a year till April 2019.
Now they have announced that they are abandoning the national insurance tax cut altogether.
2.7 million self employed would have benefited from this to the tune of £150 a year.
State Pension Contributions Would Rise
It gave as the reason for abandoning it that self employed people earning less that £6,205 a year would have to pay more to get the state pension.
However, it also stated that they would save £350 million a year by scrapping it.
John McDonnell of Labour said it was a “betrayal of the self employed”.
Voluntary National Insurance Contributions
It seems that self employed people earning less than £6,000 a year were paying voluntary national insurance contributions so that they would get the state pension.
Without this they would have had to move to Class 3 national insurance.
This would raise their contribution from £2.95 to £14.65 a week.
It was Government concern for these people that caused the Chancellor to abandon the national insurance tax cut for contractors.
The fact that abandoning it would save the Government £350 million a year was purely incidental they assure freelancers.
Surely they could have found some other way for those self employed freelancers earning less than £6,000 a year.
Surprise at National Insurance Tax Cut
One is even surprised in the first place that the Government had even offered this national insurance tax cut the to the self employed.
Governments of whatever hue have never done very much for contractors.
Indeed, they seem determined to make to eventually make freelancers pay exactly the same tax as permanent employees – but without any of the benefits.
Theresa May’s Freelancer Anomaly
Indeed, Theresa May stated that “It was an anomaly that a self employed person earning £100,000 a year should pay less tax than an employee earning £100,000 a year”.
This is crazy, as we all know it is not comparing like with like.
Freelancers have more risk, fewer benefits and more expenses than a permanent employee.
Big Consultancies Advising Government
No doubt the big Consultancies have implanted this idea in Prime Minister Theresa May’s and Chancellor Phillip Hammond’s minds.
The big consultancies have never liked contractors, seeing them as rivals and they would be delighted if the Government abolished them altogether.
They would much rather the Government and private sector companies would hire fresh graduates from them rather than contractors at half the price.
If freelancers had a decent lobbying body they would have disabused the Prime Minister and Chancellor of this notion a long time ago.
New Government Attack on Freelancers Imminent
Chancellor Hammond almost certainly will initiate another attack on freelancers in his Autumn statement in November by announcing that the disastrous IR35 rules the Government rolled out to the public sector last April are to be rolled out to the private sector too.
It is likely that at least half of contractor in the private sector will suddenly become employees of either their agencies or more likely umbrella companies next April.
However, the Chancellor and Prime Minister are unlikely to stop their attacks on contractors till the ‘anomaly of freelancers paying less tax than employees on the same money is completely fixed.
In the meantime, they are likely to keep praising the self employed as the backbone of the economy.
This is while all the time crippling them financially.
The scrapping of the National Insurance Tax Cut is likely to be followed by more attacks on freelancers.
For more news and advice on IR35 click on IR35 Tax.
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